The European Union was screaming bloody murder when the Bush Admin. announced in early March tariffs ranging from 8% to 30% over the next several years against foreign steel.
Quickly filing a protest with the World Trade Organization, the stern response from Europe was expected as well as from China, South Korea and Russia. But the amount of homegrown criticism was surprising and misinformed.
The only complaints should've been from the steel industry, which didn't get as much help as it needed. Imports have clobbered the market in recent years, causing more than 30 bankruptcies.
Tariffs ranging from 8% to 30% on most steel imports won't derail the U.S. economic comeback, as critics suggest. Even the most unfavorable study suggests a family of four will pay about $280 more a year for autos, houses and appliances. And that's if companies pass the cost on to consumers. After all, the price of cars didn't go down in 1998 when steel prices fell 50%.
Because steel is so cheap, the Bush tariffs won't suddenly make the price unreasonable. So steel won't lose its price advantage when vying with the aluminum industry to win product applications from auto makers.
What's overlooked by tariff critics is the importance of the steel industry to the U.S. Despite its image as an archaic and fading industry, steel consumption is actually increasing, and research and development efforts are churning out new high tech steels that are lighter, stronger and more durable.
The steel industry also is a foundation of the U.S. economy. It is a source of well-paid jobs, and imperative to national defense. Buying steel from another country to make ships and tanks leaves the U.S. susceptible to supply disruptions and fluctuations during inopportune times.
The steel industry's importance isn't unique to the U.S. Just look at some of the world's other leading economies or high-wage nations — Japan, Germany, Austria and Sweden. But it's Europe's tiny Luxembourg that is the best example of the prosperity that the steel industry can bring. According to a recent USA Today article, Luxembourg regularly ranks among the five richest nations in per-capita income. Steel goods represent about 25% of the country's exports.
The U.S. steel industry needs tariff support to buy time to reorganize and consolidate itself.